Banks have come under fire this week for allegedly closing customers’ bank accounts over their political views.
Politician Nigel Farage claims his current account – believed to be at private bank Coutts – was shut due to his Brexit campaigning.
Farage told MailOnline: ‘Some of these ridiculous rules and closures have been extended to my immediate family. I am enraged and also have a feeling of guilt that members of my family are being punished for my campaign to leave the European Union’.
Banks even face a Treasury probe over the issue – regardless of whether the complainants are correct about why their accounts have been shut.
Don’t bank on it: Big banks stand accused of closing customer current accounts for their views
The closures have sparked outrage from the public, many of whom feel that banks should not close accounts over political views, no matter how disagreeable.
The issue is worsened by a lack of transparency around bank account closures.
For years, bank account customers have been complaining of accounts being shut with no warning and no excuse given, thanks to money-laundering laws.
So what can banks close your current account for, and what can you do about it?
Check the small print
What a bank can shut your account for is laid out in its terms and conditions for current accounts.
These are fairly similar from bank to bank, with some small changes.
For example, HSBC’s small print says it can shut an account if the owner breaks the law, lies, abuses staff, withholds information, would cause HSBC to break regulations or breaks the contract ‘seriously and persistently’.
Barclays’ current account conditions allow it to close accounts for crime, abusing staff, lying about personal information, breaking the contract or putting the bank in a position where it might breach banking rules.
It can also close an account if it has not been used for ‘a long time’ or a customer no longer meets criteria for keeping an account open, such as having an income of at least £75,000 for its Premier current account.
NatWest and Lloyds can close current accounts for similar reasons.
Normally banks have to tell a customer why they are closing an account.
However, there are also two loopholes that let banks shut an account without giving any reason at all.
The first is the ‘tipping off’ rules of the Proceeds of Crime Act 2002.
Tipping off in this context is when a bank lets a customer know they are under possible investigation by law enforcement.
This situation could happen if, for example, the police tell a bank that the customer is under investigation for money laundering.
Unless the police say otherwise, the bank will then freeze or shut the customer’s account. But the bank cannot tell the customer why, as this would ‘tip them off’.
Anyone guilty of tipping off can face prison time under the Proceeds of Crime Act, including bank staff.
This law only applies to customers suspected of money laundering and other crime, but critics think it is being used by banks to ‘hide behind’ when closing accounts for others reasons too.
Hot tip: Many banks will not give a reason for closing current accounts due to UK legislation
An even broader loophole is guidelines from banking trade body UK Finance for getting rid of a customer.
These guidelines say banks do not have to tell a customer why they are closing their account if it is not ‘appropriate or permissible’.
This includes a customer breaking the bank’s terms and conditions, being abusive or if the bank has been ordered not to say anything by regulators, the Government or police.
This is Money approached the UK’s largest banks over the issue – Lloyds Banking Group, including Bank of Scotland and Halifax, NatWest, including Royal Bank of Scotland, Barclays, HSBC and Nationwide.
All would not comment, instead deferring to a joint statement from UK Finance.
A UK Finance spokesperson said: ‘Firms recognise the importance of customers not having their accounts closed inappropriately or unfairly, and therefore the decision to close an account is only taken after extensive review.
‘UK Finance does not hold any information on individual cases, but some of the reasons why a firm may decide to close an account include breaches of terms and conditions; abusive or threatening behaviour; or suspicious activity on the account.
‘If a firm concludes that it cannot continue to offer services, it must communicate this to the customer so far as permissible and in every case treat the customer fairly.’
What to do if your bank shuts your account unfairly
If you have already complained to your bank and it has not given in, the only option is to turn to the Financial Ombudsman Service if you feel your bank has been unfair.
The FOS wants banks to be fair and reasonable when closing current accounts, and to give at least 30 days’ notice, unless:
- Banks suspect customers of fraud
- Customers threaten or are abusive to bank staff
However, even the FOS guidelines for banks say: ‘You don’t have to explain to a customer why you’ve closed their account, but it can be helpful to do so.’
You can make a complaint to the FOS online here. The service is free.
If you’ve had your current account closed without warning or explanation, contact: editor@thisismoney.co.uk
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